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Foreign Funds that Excel in Downturns

NEW YORK ( TheStreet) -- With much of Europe stuck in recession, investors have reason to be wary about international funds. More bad news from the eurozone could send markets reeling. But at a time when the outlook for the U.S. economy is uncertain, it is important to be globally diversified.

A particularly steady performer is iShares MSCI EAFE Minimum Volatility. The ETF demonstrated its value in the second quarter of this year when concerns about the European crisis sank foreign stocks. During the period, the MSCI EAFE index -- a popular foreign benchmark -- dropped 7.1%, but the Minimum Volatility fund only declined 1.0%, according to Morningstar.

To control risk, the low-volatility portfolio includes steady stocks. The fund stays diversified by keeping sector and country weightings roughly in line with the MSCI EAFE universe.

Holdings include such reliable performers as
Nestle(NSRGY) and drug makers
GlaxoSmithKline(GSK) and
Roche Holding(RHHBY) . While the ETF is only one year old, the benchmark has been operating since 2002. The minimum volatility benchmark has excelled in downturns. When MSCI EAFE dropped 43.1% in 2008, the minimum volatility benchmark declined 27.3%. In 2011, the low-volatility index about broke even, while the EAFE benchmark declined 11.7%.